Picture: REUTERS/ARND WIEGMANN
Picture: REUTERS/ARND WIEGMANN

Wilmington/San Francisco Tiffany & Co is suing to force LVMH to go through with its $16bn acquisition, while LVMH said on Thursday that it would sue Tiffany to get out of it, in the latest broken deal to wind up in court.

The acrimony between the companies escalated after the French luxury giant moved to back out of its purchase of the iconic jeweller. Bloomberg News reported that LVMH CEO Bernard Arnault, France’s richest man, asked for help from the French government in an effort to pull out of the transaction.

At least eight major cases including Tiffany are pending in Delaware chancery court, the premier venue for US business litigation.

The coronavirus pandemic has added to the list of what can go wrong in a transaction, leaving jilted partners such as Tiffany with nothing to lose by suing. These disputes typically focus on what conditions would allow a buyer to exit a deal — many of the current litigants are saying the pandemic qualifies.

Lawsuits in the Delaware court encompass about $30bn in failed deals with Tiffany and LVMH being the largest this year.

Overall, deals for US companies totaling $94bn have been terminated this year, according to data compiled by Bloomberg.

Disputes involving those failed deals have also landed in other courts. In Michigan, Simon Property Group and Taubman Centers are suing each other after Simon walked away from its $3.6bn takeover.

It’s only in rare cases that the courts have forced a company to go forward with a deal. One of the few was in 2001, when then Delaware chancery court judge Leo Strine Jr ruled that IBP hadn’t concealed financial information and that Tyson Foods had to complete its $4.7bn acquisition at the agreed price.

In another case, a chancery judge in 2017 barred Cigna from scuttling its $48bn merger with Anthem, though the US justice department later blocked that deal on anti-trust grounds and the two sides returned to the Delaware court to fight over termination fees.

Even if they don’t win, plaintiffs in such cases can pick up some leverage in negotiating a settlement or a better outcome. Some analysts and investors are holding out hope Tiffany can reach a new deal with LVMH, for example.

In a case that could bear on Tiffany’s claims, a court allowed generic drugmaker Fresenius in 2018 to ditch its $4.3bn acquisition of US rival Akorn. The case was the first in which a Delaware judge clearly found that a deterioration in business qualified as a material adverse event. That deterioration was tied to an attempt by Akorn to cover up operational problems in the hopes of ramming the deal through.

That type of legal claim — now typically citing the effects of the pandemic — is central to many of this year’s busted-merger cases.

Bloomberg

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